Insolvency

Administration

The Administration process is primarily a method to rescue a company in financial difficulty. The process requires an Insolvency Practitioner (IP) to act as the Administrator of the company. The IP must establish that the company falls into the following criteria, in the following sequence of priority:

Can the company be rescued as a going concern?
Can the administrator achieve a better result for the creditors than a winding-up of the company?
Can the administrator realise property to make a distribution to secured and preferential creditors?

The Administration process can be implemented by the company, its directors, or by any creditor who holds a “qualifying floating charge” over the company. Because of recent changes in the law, the involvement of the Court is no longer required in most cases, although a Court process remains available in specific circumstances. The company, or its directors can nominate the IP that they wish to be appointed to act as the administrator of the company, however if a creditor holds a qualifying floating charge, they have the final decision on the appointment. Whichever route is used the properly appointed Administrator is an officer of the Court and will act accordingly in the interests of the relevant stakeholder groups. We at Grosvenor Partners LLP will advise on benefits or drawbacks of the Administration process to your company and prepare all the necessary paperwork. We work with the directors, shareholders and any qualifying floating charge holder throughout the Administration process, and are available to discuss and deal with any issues. We can also work with the key members of the company to formulate a rescue or turnaround solution. It is envisaged in the legislation that an Administration will last for up to a year, although this period may be extended. Depending on the purpose of the Administration, the whole process may only take a few months. Typical companies entering into Administration include:

Where the company has suffered short term trading issues.
Where bad debts have temporarily affected cash flow, but the company is otherwise profitable.
Where breathing space from creditor pressure is need by the company during a period of refinancing or restructuring.
Where part, or all of the company is being sold and the directors wish to ensure the transparency of the sale.
Where a prospective purchaser of the company has been identified but they have concerns about transacting with an insolvent company.

Please call Mark Bassford or Heves Irfan on 020 7213 0470 if you are the director or shareholder of a company and would like advice or to discuss any matters raised. Alternatively ask your company’s existing professional advisors to contact us to discuss the options available.